IN 1950 Britain was the second largest producer of cars in the world after America. We sold three times as many vehicles to overseas markets as they did, and six times as many as the West Germans. At this time, the Japanese were still in the lay-by, up on bricks. Honda was just two years old.

Toyota, bedevilled by strikes and a demand slump which led to the firing of a quarter of its workforce, had made only 2,685 cars in its 13 years of automotive trading.

How things change. Toyota now makes 3.75 million cars a year and may soon displace Ford as the second biggest producer in the world after General Motors. Meanwhile, British firms have suffered something of a calamity in the last 45 years. Dozens of names such as MG, Austin and Morris have disappeared; Aston Martin and Jaguar have been sold to Ford. Earlier this year, our last volume producer, Rover, was bought by BMW from British Aerospace. This leaves Rolls- Royce and the tiny Blackpool-based TVR as the remaining UK-owned car makers of any note.

But let's not dwell on the downside. According to Professor Dan Jones of the Cardiff Business School, co-author of the influential book The Machine That Changed the World, Britain is back among the front runners - but with a difference. Of all the European countries, it has been quickest to embrace the Japanese notion of 'lean' production. With its tenets of economy and efficiency, this, says Professor Jones, represents the third age of car manufacture, after the first age - craft production; and the second - mass production as implemented by Henry Ford. In a typical third age manoeuvre, Nissan - with its factory in Sunderland - last year became the leading exporter of cars from Britain.

Honda is another example of the third age in action. It started production in Swindon in 1992, and now employs 1,750 people. Andrew Jones is the plant manager. He is a busy, terse man who, like many of those rewarded with jobs by Honda, had no previous experience of vehicle manufacture. The Japanese like employees' minds to be a tabula rasa. (He worked previously for mining companies and British Telecom.) Like everyone else, Jones wears the standard uniform of white overalls and a green baseball cap with the Honda logo. Like everyone else he has his first name embroidered on the jacket. He shares an office with other members of management and has no executive parking place. One of the first things one notices is how clean and neat the factory is. You could almost eat your breakfast off the floor. 'You can't produce a quality product in a shit heap,' snaps Jones as he goes striding down the aisle, nodding at staff as he goes.

What we are about to witness at Swindon is the birth of a brand new Honda Accord. The manufacturing process starts with molten aluminium; this is poured into die-casts to make the basic blocks for the engine. After the machining of the aluminium, assembly of the engine can begin. Meanwhile, the steel panels that will go to make up the body of the Accord are being pressed at another plant.

'At zero eight hundred on the 27th of March 1995,' Jones says, 'we will start pressing our own panels here, on site.' I admire the precision of the prediction. 'Since we started here,' he explains, 'we've had 50- odd projects costing more than a million pounds. Each one has had the precise hour, day, month and year that it will go into operation worked out way in advance.'

Making cars is a complex, difficult business. These are among the most awkward volume-manufactured products in the world. When Henry Ford said customers could have any colour they wanted as long as it was black, it was not because he liked funereal tones. It would be far easier to make cars if everybody was happy to have the same thing.

The fact is, they are not. Colour differences are the most visible example of tailoring to an individual customer's taste. Fridges are white and hi-fis are black - in the main - but Honda Accords come in seven different colours.

The company is particularly proud of its paint shop at Swindon. Most manufacturers send the body shell nose-first through the primers and 'surfacer' coats like a dolphin through water. At Honda, the cradle holding the car is dipped in sideways - a process that is far more awkward, but ensures much better paint penetration.

As you enter the humid atmosphere of the paint shop there is running water flowing under the walkway to take away specks of dust and dirt that may have been brought in on people's feet. After baking to seal the paint, the frame and engine are first wedded together.

Approximately 2,000 imported parts go into an Accord, and Honda uses 199 European component suppliers. Twenty years ago in a British car plant, large amounts of space would have been taken up storing parts ready for assembly into cars. According to 'lean' production principles, this is all wrong.

The jargon here at Swindon, when it comes to parts, is 'just in time'.

Michael McEnaney, a senior manager, explains: 'Rather than see the production process as happening simply 'on site', you extend the assembly process to your suppliers - so the flowing process starts with them.' This involvement of suppliers in the production process means that, on-site at Swindon, they hold no more than half a shift's worth of inventory. Precision timing is therefore needed as alloy wheels, for example, are brought in from Italy.

The 'just in time' philosophy can have its drawbacks. Production lines can sometimes be caught short, if vital parts do not arrive. On one occasion components had to be brought in by helicopter to keep the line moving. As the car advances down the line, more and more freshly produced items are added: seats, windscreens, air-conditioning units, cigarette lighters.

Another major tenet of lean production is that the process is worker-centred. Multi-skilled teams are encouraged to take an active role in finding the most efficient way to perform their tasks. (The staff themselves designed the tool that puts on the wheels, for example.) There are very few staff who are not directly involved in hands-on production.

Honda does not have employees but 'associates' - and if you mentioned the word 'foreman' at Swindon you would be looked at in horror. The starting wage for an associate here is pounds 12,500. No union is allowed at Honda, so all staff are on individual contracts. The company is cagey about remuneration for the next grade up - 'team leader' or 'lead associate' - because such individuals earn differing amounts.

There is no annual increment at Honda. For the past two years, associates have been awarded annual wage increases of 3.7 per cent. There is a benefits package which includes private healthcare, access to a cheap car-leasing package after three years' service, and three days' paternity leave. (Less than 10 per cent of the workforce are women, though some do work on the production line.) When employing staff, Andrew Jones is looking for 'open minds, flexibility and commitment'. Honda likes recruiting people young, and the average age is 28. There is no apprenticeship system. Two daily shifts run from 6am-2.20pm and from 3.30-11.45pm (Jones says it is 'impossible to produce a quality product on 24-hour working'), with two 10-minute tea breaks and a 30- minute lunch break each shift.

Associates work a 37-hour week. Though machines perform many of the tasks on the line, it is surprising so many humans are kept busy. 'The industry has pulled back on automation,' Professor Dan Jones explains. 'At Fiat they were great enthusiasts, but they went too far and found it was very expensive and didn't work. What is important in making cars is not machines, but ensuring a smooth flow of work. It's important that lean production does not depend on keeping machines busy.' Andrew Jones explains Honda's philosophy: 'We automate when the job is hot, dirty or unpleasant, not for its own sake.'

But aren't all jobs on the production line hot, dirty and unpleasant? Aren't they mind-numbingly repetitive? If making cars at British Leyland in the 1970s had been more enjoyable, perhaps the strike record would have been better. I spoke to Darren, a young man in his twenties working on the final stages of engine preparation. He had been at Swindon for four years and knew he had 110 seconds to perform eight functions on the engine as it passed him.

'Yes there is repetition and routine,' Andrew Jones admits, 'which is inevitable in mass production. But people get tremendous respect for doing it. They can't just switch off, because it is their concentration that creates the quality. They are not dead from the neck up.'

Professor Dan Jones agrees: 'It's not paradise, it's hard work - but at Honda they are generally happier than other car-workers because they are enthusiastic about changing their environment. They can sort out niggling problems. They have a degree of power, responsibility and knowledge and certainly do not leave their brains at home when they come to work each morning. They don't feel they're battling against a system that somebody else has designed.'

At Swindon, Honda makes 240 Accords per day and the annual production target is due to rise from 100,000 to 150,000 by the end of the decade. However, the daily target figure is of less importance than the 'RFT' figure - which stands for 'Right First Time'. This is the current buzz phrase of the industry, and the lean production enthusiast's mantra. The number refers to the percentage of cars that reach the end of the production process without faults, and are therefore ready to be delivered to customers. It may not matter to a customer whether the car was right first time or not, as long as it is right when it is finally driven off the dealer's forecourt. However, those cars that are not RFT have to be re-worked at considerable expense and waste of time.

The RFT target at Swindon is 90 per cent. 'There is anecdotal evidence from employees,' Professor Dan Jones says, 'that at Volkswagen they have to do extra work on 20 per cent and more of finished cars. This is a problem when you have a factory, as they do at VW, that is two miles long, employs 60,000 people and is so functionally organised that workers don't look for problems.'

A Channel 4 documentary, Car Wars, screened earlier this year, included an interview with a VW worker who claimed a mere 35 per cent of cars were right first time. In fact VW is not the only German manufacturer which has lagged behind in this area. Professor Jones continues: 'Certainly, when we visited Mercedes back in 1989 they were taking more hours to rectify models coming off the line than Toyota was taking to build a perfect Lexus in the first place.' Mercedes has made strenuous efforts to improve its production methods and has progressed considerably in the last five years.

The day I visited Honda at Swindon they were achieving an RFT figure of 97.7 per cent. It is interesting to compare this with a passage from The Car Makers, a book from 1964 which analysed the ills of the British car industry. The author, Graham Turner, asked a production line worker in an unnamed Coventry firm about inspection. 'Inspection?' he said. 'It's a farce. The inspector says it's not good enough. The gaffer comes along, they have a little natter and then they decide to let it go.'

When they have been completed and after they have gone through the 'monsoon' to check for water leaks, the final test for the Accords at Swindon is to drive the car up and down a runway outside the plant to check for squeaks and rattles. At this stage one becomes aware of a spicy irony. The site and the runway used to be owned by Vickers Supermarine. This Japanese product is being made on the same spot as that most successful piece of British transport engineering - the Spitfire.- (Photographs omitted)